The city of Philadelphia is on the rise as its business sector booms with growth. With lower rents then its neighboring big cities of New York and D.C. yet still close by proximity, Philadelphia is quickly becoming a powerhouse player for businesses to call home. Call a Philadelphia Commercial Realtor or Tenant Rep to help you move your business to this bustling city.

3 Reasons why you should move your company to Philadelphia

Rent costs are cheaper

Sylvie Gallier Howard, the First Deputy Commerce Director for the Philadelphia Commerce Department, told NBC 10 Philadelphia News in August of 2018 that the same amount of space in New York City would likely cost three times what it would cost in Philadelphia. And with rent being one of the key fixed costs for a business, this is an extremely important factor to consider, especially for small businesses. Hiring a tenant rep can help you find the right location and negotiate the best commercial lease for your business.

The city is growing

Philadelphia has already begun to boom with the arrival of the tech industry and more and more college graduates deciding to stay, as Joshua Davidson explained in an article for StartupGrind. With less competition than other major cities, Philadelphia is attracting recent grads. Davidson wrote that in 2015, Philly Magazine reported a 41.2% growth in millennials during 2006-2014, many of whom are searching and ready for work. The city itself offers incentives for startups and entrepreneurs, as well. One such program is Jump Start Philly, exempting new businesses from certain taxes and fees. A licensed Philadelphia real estate agent who works with Corporate Tenants and Buyers of commercial real estate can help streamline this process and make your move to Philadelphia as smooth as possible.

Philadelphia is central to other locations

In addition to being home of Philly cheesesteaks and lots of U.S. history, this rich and diverse city is central to other major East Coast cities, allowing its denizens to arrive in New York City, Washington D.C. or Baltimore in less than two hours. With lower rents, Philadelphia in spite of its U&O tax, and its suburbs can be the perfect location for your business outside those major cities yet still within easy driving distance to each. A Philadelphia Commercial Realtor or Tenant Rep can help you pick a location within the city that is best for your company’s needs.

With lower rents, a business-friendly environment, entrepreneur/startup incentives and a central location, Philadelphia is the perfect city to move your business to. There are also areas designated as Federal Opportunity Zones in the city and suburbs. Call a qualified commercial real estate professional today to begin to discuss the possibilities!

Your business has to operate out of somewhere, and when it’s time to look for dedicated commercial space for your company, you’ll have a lot of decisions to make. And one of these decisions is whether to lease or purchase your office space.

Both options come with their own set of advantages and disadvantages, so you’d be well advised to do your due diligence and conduct a little research before deciding which option works best for your company.

So, the question remains: is it better to lease or purchase office space in Philadelphia?

Understanding the Pros and Cons of Leasing Commercial Office Space

Commercial real estate investors might assume that purchasing office space is the better way to go, but leasing office space comes with its own set of pros and cons, including the following.

Pros of Leasing Office Space

No down payment required.

As with any other types of real estate purchases, a down payment is required. However, a lease doesn’t require such a large capital investment up front. Rather, a security deposit will be required, which is typically substantially less than a conventional 20 – 25% down payment, maybe 10% with SBA loans. In Philadelphia, you frequently see landlords requesting a security deposit equal to about one or two months’ rent. Or, it could be more and varies with credit worthiness of tenant and landlord’s investment in tenant improvements for tenant.

That means you’d have a lot more capital for your business, that would otherwise have been tied up in a down payment.

No maintenance or repair obligations.

Every building will require its own fair share of maintenance and repairs over time. It’s inevitable. But where these responsibilities lie depends on whether you’re leasing, or paying a mortgage.

If you’re the rightful owner, the obligation to maintain and repair the structure lies 100% on your shoulders. That means you’ll not only have to cover the financial cost of these repairs and maintenance costs, but you’ll also have to manage such efforts.

If you’re leasing, however, these obligations often lie with the landlord, not you. This can free up a lot of effort that you can otherwise dedicate to your business.

Flexibility to expand/or contract.

If your company reaches a point where it’s time for expansion, a lease can provide you with the flexibility to grow, as opposed to being stuck with a place that you’ve purchased. Among all the factors to consider when it comes to deciding between leasing and purchasing office space in Philadelphia, one of the more important ones is flexibility to expand.

A growing business will find that a lease can provide them with a much better way to accommodate expansion as opposed to buying. With the right commercial real estate agent in your corner when you first sign the lease, you may want to add expansion contingencies and options in the lease that can provide you with the “right of first refusal” to acquire space that might become available in the office building if or when your business needs it.

Purchasing office space, on the other hand, can limit your size flexibility.

Cons of Leasing Office Space

While leasing comes with a certain set of advantages, there are some drawbacks to consider.

Potential increase in rent.

Most office leases have annual rent increases. And on a lease renewal it’s always possible that your landlord will increase your lease price. If the cost is out of your budget, you could find yourself uprooting your business to find a place with a lease price that fits in better with your budget and profit margin.

Improvements made will stay with the building.

If you decide to make any changes or upgrades to the building to better accommodate your business operations, you can’t take them with you when you go. The only person to benefit from the time, effort, and money spent on making such improvements when you leave may benefit your landlord.

Understanding the Pros and Cons of Purchasing Commercial Office Space

Now that you’re familiar with why leasing office space in Philadelphia has its pros and cons, consider those of purchasing office space.

Pros of Purchasing Office Space

Build equity.

One of the biggest perks of buying property is the opportunity to build equity – and subsequently wealth – over time. Every mortgage payment made goes towards building equity. And over time , if you maintain, and keep your property up to date , you may see the value appreciation as well.

Payments less likely to fluctuate.

Unlike rent, which can change every time it’s time to renew your lease, you can be more comfortable knowing that your mortgage payments will stay the same – assuming you’ve chosen a fixed-rate mortgage.

Opportunity to make extra income.

If you own your property, and it has extra space for the growth of your company you have the freedom to lease out a portion of it to generate extra income. Versus sub-leasing your excess leased office space which is more complicated. In the lease the Landlord may control the rate for the sublease and who you can lease to. And, who would spend the money on Tenant Improvements? In a sub lease most likely you and you can not leverage the Asset.

Make improvements to add value.

If you choose to improve your property, you can maintain and sometimes add value to it as you build equity.

Take advantage of tax benefits.

When it comes time to file your taxes, you’ll have the opportunity to deduct certain things such as property taxes, improvements, mortgage interest, and so forth.

Cons of Purchasing Office Space

Upfront cost is higher.

Buying comes with much more significant upfront capital invested costs compared to leasing. And typically you should purchase a building that is larger than your business require to accommodate future growth. This is precisely why many businesses choose to lease. In addition to the actual mortgage payments and down payment, there are several other closing costs and Due Diligence costs associated with buying property that you wouldn’t be faced with had you chosen to lease instead.

You’re responsible for maintenance and repairs.

This can just be added to the list of costs associated with owning property. When you’re the owner, the onus to maintain and repair the property is 100% on you.

At PG Commercial Real Estate, we strive to ensure that our clients know as much as they can about both sides of the coin in order to ensure that they make a sound decision that’s best for their business. Whether you decide to lease, or purchase your office space in Philadelphia, we’ll be with you every step of the way in order to ensure you enter into a solid agreement.

The world of commercial office space is changing. The questionsis not only how it’s changing but where?

In the 1940’s and 1950’s, returning GI’s left the cities to buy their dream homes in the suburbs. The developers were more than happy to accommodate and thus began the suburban sprawl. Office buildings were built to accommodate companies that wanted offices near their owners, employees, and customers. For over 50 years, this cycle repeated itself throughout the country and suburban office markets boomed.

This changed in the first decade of the new millennium. The millennials, raised on digital social connectivity, wanted social connection in real life and a lifestyle incorporating working, living, and playing, in the same proximity. They moved to cities, both large and small, that could accommodate their lifestyle: New York City, Los Angeles, San Francisco, Chicago, Boston, Denver, Salt Lake City, Nashville, Austin, Portland, and Phoenix. Technology and other industries followed, driven by their need for millennial talent. As a result, the millennial population and businesses grew exponentially in the cities while declining dramatically in the suburbs.

The question is how long will this new paradigm last? It has been predicted that once the millennials reach forty years old they will start families, want houses, and move to the suburbs. Since the millennials are defined as the demographic born between 1980 and 2000, the first 40-year-old millennials won’t reach us until 2020. All we can do is wait; time will tell.

Collaborative office space was originally conceived by Steve Jobs for his new Pixar headquarters in Emeryville, California. He believed employees who work independently are less creative than those who work together. So he designed Pixar to provide chance encounters, giving employees the opportunity to connect, collaborate, and create.

As more tech companies adopted this approach, they observed and experienced the extensive benefits of collaborative office space:

Reduced Footprint. Traditional office spaces are based on 250-300 square feet per person. Employees in collaborative space sit at benches and managers use workstations, thus reducing space needs by up to 40 percent.

Google Space. Google took collaborative space to the next level. Perks such as gourmet food, massages, and fitness facilities are bait to attract and retain top talent. This minimizes the need for and cost of staffing companies.

Work/Life Balance. Google Space has become so attractive to employees that they don’t want to leave the office. They eat gourmet food and have their dogs at their side, enabling them to work late into the evening.

Fewer Sick Days. Wellness has become a major component of the new office environment. Healthy foods and exercise areas promote wellness, reducing time away from work.

Innovation. Collaborative space fosters creativity. Since all companies thrive on innovation, collaborative office space has become a major contributor to their success.

Brand Promotion. While collaborative space is good for the employees, the design of today’s office space has become a showroom for the company’s brand, which helps to sell the company’s products to potential clients.

The benefits of collaborative office space are too numerous and influential to ignore. That’s why so many of the world’s top companies are retrofitting their offices accordingly. Contact Peggy Gallagher, your ITRA Global Representative to re-invent your office environment!

With the advent of the internet and the wealth of information available online…. do I really need a commercial real estate agent to assist with my commercial real estate transaction?

Yes, and here is why.

As you can imagine finding a business location and/or a lease renewal for a location is a process. It is not just identifying a building and zip code it is more, and for those purchasing, it is a long term investment.

It is most efficient if you select a commercial real estate broker who can help you do the following:

See the Big Picture

Understand the Value of your Purchase

Negotiate the Best Terms Possible

Devote the Manpower and Time to Achieve all your Goals

Most commercial real estate agents work on a contingent basis, meaning they will get paid upon the purchase, or signing of the lease, which is usually paid by the Seller, or Building owner. This type of arrangement is often a win-win situation for the company as they are not obligated to make a purchase. With that being said a company may also enter a retained agreement with a retainer for services for a larger project that will take several years. Also most agents are working for the Buildings Owner. If you are a business looking for a location, or faced with a lease renewal, select an agent to represent your business.

If you decide to hire a commercial real estate agent we suggest you interview a few professionals and choose someone you like, trust and who has experience!